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The Securities and Exchange Commission (“SEC”) just issued a press release announcing KBR, Inc. has its “first enforcement action against a company for using improperly restrictive language in confidentiality agreements with the potential to stifle the whistleblowing process.”
At issue, was KBR, Inc.’s standard practice of requiring employees interviewed in internal investigations to sign confidentiality statements with the following language:
“I understand that in order to protect the integrity of this review, I am prohibited from discussing any particulars regarding this interview and the subject matter discussed during the interview, without the prior authorization of the Law Department. I understand that the unauthorized disclosure of information may be grounds for disciplinary action up to and including termination of employment.”
The SEC found those terms violated Rule 21F-17, which prohibits companies from taking any action that would impede whistleblowers from reporting possible securities violations to the SEC.
In addition to agreeing to pay a fine of $130,000, KBR, Inc. also agreed to amend its standard confidentiality statement signed by employees interviewed during an internal investigation to read as follows:
“Nothing in this Confidentiality Statement prohibits me from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. I do not need the prior authorization of the Law Department to make any such reports or disclosures and I am not required to notify the company that I have made such reports or disclosures.”
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